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Forming your business as a limited liability company allows you to have more structure in keeping your business and personal expenses separate for tracking purposes, less paperwork than a regular corporation and more flexibility in choosing the type of company that works best for your situation. There are different types of limited liability companies, and each has its own benefits.

Sole Proprietorship

This is where just one person owns and operates the business. He is personally liable for business transactions, debts and taxes the business creates or owes. This is probably the most common type of filing as well as the least expensive to form. It also has the least amount of paperwork involved.

General Partnership

This structure is used when there is more than one member of the LLC being formed. This partnership means each of the co-owners is now responsible for the debts, business transactions and taxes the business creates. Each of them has a say in the sale of assets, and each of them pays taxes on her share of the business income.

Limited Partnership

A limited partnership is very similar to a general partnership. There is more than one person sharing responsibility, but the key difference is that one member must maintain full liability for the business structure and have at least one member that only has a limited amount of liability. For example, let's say Mr. Smith currently has a sole proprietorship but wants to bring on a partial business partner. The partial business partner would be the limited member and he would only have limited decision-making ability in matters of the company, receive limited profits and have limited liability.

Family Limited Partnership

This structure is just like the limited partnership as described above, except all the members are family members. Most commonly, families in this case is form a limited liability company as a general or limited partnership and then place their assets into this structure. When they feel it is necessary to do so, they can assign control or change the membership so the children or other relatives take full control over the assets. Doing this in the structure of a limited liability company may save the family money depending on the situation.

Considerations

It is always recommended that partnership agreements be made in writing similar to that of a pre-nuptial agreement before signing on the dotted line. Without a partnership agreement, the business structure is subject to whatever default state laws are in place if one of the partners dies or if the company is dissolved for any number of reasons. Always consult proper tax and legal counsel while forming and running a business.

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About the Author

Misty S. Bledsoe has been writing since 1995. She specializes in writing about religion, technology and solar concepts, and her articles appear on various websites. She holds a Bachelor of Science in information technology from American Intercontinental University.